Overbidding: The Silent Deal Killer in Government Contracts

Why Pricing Too High Can Cost You More Than Just the Contract

In the commercial world, high pricing can sometimes be justified by premium quality, brand recognition, or perceived value. However, when it comes to government contracts, overbidding is a common and costly mistake for small businesses.

The Importance of Competitive Pricing in Government Contracts

The federal government is not seeking the most expensive option. They want the best value, which means fair and competitive pricing backed by capability and compliance.

🚫 What Happens When You Overbid?

You Get Disqualified Before Anyone Looks at Your Offer

If your price is significantly higher than your competitors—or even just higher than the Independent Government Cost Estimate (IGCE)—your bid may be dismissed early. This happens regardless of how strong your proposal may be. Contracting officers are trained to flag unreasonable pricing right away.

You Send the Wrong Message

Setting your price too high can convey that you are inexperienced or, even worse, untrustworthy. For instance, if a Contracting Officer (CO) sees a $35,000 quote while others bid $25,000 for similar awards, they might assume that you don't understand the scope of the contract or are inflating costs.

You Miss Out on Building Past Performance

New vendors often aim to "go big" with their first few contracts. However, in the federal contracting space, strategic wins matter more than significant profit margins—especially in the early stages. It is often wiser to aim for credibility first and profitability later.

🔍 Real Example from the Field

At Sea Crest Procurement, we once reviewed a bid where a vendor quoted $215/hour for fleet maintenance, without realizing the prior awarded rate was $175/hour. After checking the procurement history on SAM.gov and contacting the contracting office, we learned that pricing was a major reason the contract went to another company, despite the vendor's qualifications.

That contractor could have secured the contract by aligning their prices more closely with historical rates. They could then gradually increase pricing on future contracts or follow-ons once they had proven their value.

💡 How to Avoid Overbidding Mistakes

To avoid the pitfalls of overbidding, consider the following steps before finalizing your quote:

Check Award History

Utilize tools such as FPDS.gov, USASpending.gov, and SAM.gov to gather pricing data from similar awards. This will give you a strong understanding of the market ceiling and floor for your bids.

Compare Apples to Apples

Avoid simply Googling prices. Review past government contracts that align with the scope, delivery terms, and location of your proposal.

Use Cost-Building Models

Consider all factors—materials, labor, subcontractor quotes, and contingencies. After that, ensure your final number still appears reasonable in the eyes of the government.

Ask Questions Pre-Bid

If you're unsure, submit a Request for Information (RFI) during the Q&A phase. Contracting officers want fair competition and will often clarify ambiguous specifications that could lead you to overprice out of fear.

🛠️ How Sea Crest Can Help

Sea Crest Procurement specializes in smart pricing strategies. We help you analyze solicitation language, check compliance, compare market rates, and build proposals that are lean, legitimate, and likely to win. Whether your bid is for $10K or $1M, our expertise ensures you don’t price yourself out of valuable opportunities.

In government contracting, it’s not just about winning bids—it’s about winning smart. And that starts with pricing that reflects value, not fear.

---

For more insights on effective government contracting strategies, check out our article on preventing overbidding to maximize your success.

---

By understanding the repercussions of overpricing and following these guidelines, you can position your bids for success and build a reputation for fair pricing in the government contracting arena.